The Hindu Business Line : Cross-currents likely to swing market, but within a range

Did the market expect a positive verdict on Reliance Industries Limited gas imbroglio or was it the (Barack) Obama package magic that was behind last week’s rally? Or was Dalal Street positively surprised by the third quarter results announced last week? Nobody knows for sure.

The weekly market trends are often set by an aggregation of apparently irrational but manipulative moves by a section of operators.

Let us leave all that at the door of the all-powerful “market dynamics”. But will it mean a break in negative momentum this week too?

If Reliance Natural Resources Limited moves the apex court and have a stay on the interim verdict, the market may not be amused.

After all, sentiment is fickle.

FIIs are not prone to sudden opening of tap. If they have been on a waiting mode last week, they might as well continue to do that unless some hedge funds sense a short-term rally.

The key indices have shown indications of broadening the short-term range of movements in the past fortnight. A sharp swing in the immediate term can bring in rich gains even in a bear market.

Lust for cash

Long-term overseas investors – who had earlier raised funds and have in recent months lined up contacts in India and set up the route map for the money flow – are still in cash.

A few, who had invested even in the middle of 2008, are looking for an opportunity to reduce their holdings at a better price level.

It appears that fresh investment calls from the long-only breed may not come before the beginning of the next fiscal.

If risk aversion for global investors specific to local equities remains at a high level, weekly swings on Wall Street mood have a little bearing on the mindset that would trigger inflow.

According to market intelligence, large domestic investors are keener to track day-to-day changes in Wall Street sentiment than overseas investors. This provides sustenance to their trading strategies.

The consensus earnings estimate of the Dalal Street benchmark in the October-December quarter was met squarely.

For some, earnings have been better than expected. They need to revisit price targets and justify the January-March quarter expectations.

Optimists have already begun to see steady-to-better performance in the current quarter earnings.

In view of several cross-currents, market movement this week may turn volatile. But the extended Sensex range, between 8,500 points and 10,500, is likely to remain intact.

(Responses may be sent to jayanta_mallick@thehindu.co.in)